John Anthony Shaw and another v Glenn William Mackintosh and another

In 2009, Mackintosh (first respondent) lent R2 million to Mabili Search & Selection (Pty) Ltd (second respondent). In October 2012, the parties signed a written acknowledgement of debt whereby Mabili acknowledged the debt of R2 million plus R100,000 interest, payable over twelve months with ongoing interest at R50,000 per month. The agreement included clause 5 whereby Shaw and Taylor (the appellants) bound themselves jointly and severally as joint and co-principal debtors with Mabili for repayment of the admitted debt, waiving benefits of excussion, division and cession of action. When Mabili defaulted and was subsequently liquidated, Mackintosh obtained default judgment against it and then sued the appellants invoking clause 5 of the agreement. The agreement between Mackintosh and Mabili fell outside the NCA due to the amount involved and Mabili's turnover. The dispute centered on whether the appellants' relationship with Mackintosh was governed by the NCA.

• Whether the agreement between the appellants and Mackintosh constituted a credit guarantee in terms of section 8(5) of the National Credit Act 34 of 2005 (NCA)
• Whether the agreement was instead a credit transaction as defined in section 8(4)(f) of the NCA
• Whether clause 5 of the agreement constituted the appellants as sureties or co-principal debtors
• Whether Mackintosh was required to register as a credit provider in terms of section 40 of the NCA
• Whether the NCA applied to the transaction between the appellants and Mackintosh

The appeal was dismissed with costs. The judgment of the Gauteng Local Division, Johannesburg and the full court were upheld.

An agreement constitutes a credit guarantee under section 8(5) of the National Credit Act 34 of 2005 where a person undertakes or promises to satisfy upon demand the obligation of another consumer, regardless of whether the parties are described as co-principal debtors and irrespective of whether technical suretyship terminology is used. However, by virtue of section 4(2)(c) of the NCA, the Act applies to a credit guarantee only to the extent that it applies to the underlying credit facility or credit transaction in respect of which the guarantee is granted. Where the underlying credit transaction falls outside the NCA (because, for instance, the creditor is not a registered credit provider and the transaction is a once-off arrangement), the credit guarantee also falls outside the scope of the NCA.

The Court stated that for the purposes of the appeal, it was unnecessary to decide whether the high court and full court were correct in concluding that the appellants were sureties, as the Court would accept that they became co-principal debtors with Mabili. This indicates that the characterization as sureties versus co-principal debtors was not determinative of whether section 8(5) applied. The Court also observed (citing JMV Textiles v De Chalain Spareinvest 2010 (6) SA 173 (KZD)) that an arrangement could not be both a credit guarantee and a credit transaction under the NCA, though this was not extensively analyzed as it was not seriously suggested by the parties.

This case provides important guidance on the interpretation of section 8(5) of the National Credit Act 34 of 2005, particularly regarding credit guarantees. It clarifies that: (1) the definition of a credit guarantee does not require use of technical terms like 'suretyship' or 'guarantee' but focuses on whether a person undertakes to satisfy the obligation of another; (2) where a credit guarantee is given in respect of a credit transaction that itself falls outside the NCA (such as a once-off loan by a non-registered credit provider), the credit guarantee also falls outside the NCA's ambit by virtue of section 4(2)(c); (3) an agreement cannot simultaneously be both a credit guarantee and a credit transaction under the NCA; (4) the fact that parties are described as 'co-principal debtors' does not automatically prevent the transaction from being a credit guarantee if they are undertaking to satisfy another's obligation. The case demonstrates the limits of the NCA's application and protects informal, once-off lending arrangements from regulatory requirements designed for commercial credit providers.